The Growth of the Federal Crop Insurance Program, 2010–22

Key Points

• Two major trends have defined the federal crop insurance program over the past 12 years: the replacement of farm yield–based insurance with farm revenue–based products and the explosion of area- and index-based insurance for pasture, rangeland, and forage crops.
• Though still relatively small, enrollment in two relatively new products has grown over the past decade: supplemental insurance based on county yields designed to cover deductibles associated with farm yield–based policies and livestock insurance.
• Thus, enrolled acreage and total premiums for crop insurance hit record highs in 2022, with continued enrollment growth in area- and index-based policies expected in 2023.

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Introduction

The federal crop insurance program has grown significantly over the past 40 years. While the program dates back to the late 1930s, it was not until the passage of the Federal Crop Insurance Act of 1980 that the program expanded from a small pilot to the extensive program we know today.¹ In 1981, only 45 million acres were enrolled, and total coverage in force (liability) was less than $6 billion.

By 2022, total enrolled acres were 494 million, while liability was almost $195 billion. The program’s growth directly resulted from key legislation passed in 1994² and 2000³ that expanded premium subsidies for farmers and the introduction of popular insurance products, such as revenue insurance, that allowed producers to protect their crops in the event of price or yield shortfalls.

By the late 2000s, the crop insurance program had grown to become the largest single program (as measured by budgetary outlays) under the so-called farm safety net. It includes direct premium subsidies that offset the cost of insurance to the farmer and payments to crop insurance companies to subsidize delivery costs.

This report examines growth in the federal crop insurance program, particularly trends in participation and program costs since 2010. From 2010 to 2022, acres enrolled in the program have almost doubled, while total liability has increased by over 150 percent. Most growth has come in nontraditional insurance products, such as rainfall index products for pasture and grazing lands, margin coverage insurance, and livestock insurance. These new products have brought more producers into the program and provided increased protection for farm income, but at increased costs to taxpayers.

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Notes

1. A more detailed history of the program can be found in Barry K. Goodwin and Vincent H. Smith, The Economics of Crop Insurance and Disaster Aid (Washington, DC: AEI Press, 1995), https://www.aei.org/research-products/book/the-economics-of-crop-insurance-and-disaster-aid; Joseph W. Glauber, “Crop Insurance Reconsidered,” American Journal of Agricultural Economics 5, no. 86 (December 2004): 1179–95, https://www.jstor.org/stable/3697927; and Joseph W. Glauber, “The Growth of the Federal Crop Insurance Program, 1990–2011,” American Journal of Agricultural Economics 95, no. 2 (January 2013): 482–88, https://www.jstor.org/stable/23358421.
2. Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994, H.R. 4217, 103rd Cong. (1993–94).
3. Agricultural Risk Protection Act of 2000, H.R. 2559, 106th Cong. (1999–2000).